With all this bluster, you might think these new standards will deliver substantial emissions reductions at substantial economic cost to the coal industry. Think again. A detailed regulatory impact assessment concludes that, across a range of assumptions, the rule will “have no, or negligible, costs or monetized benefits associated with it.”

An emissions standard that’s not expected to reduce emissions?

For natural gas fired power plants, it is easy to see why these new source standards will have little bite. Erin Mansur and Matt Kotchen find that approximately 95 percent of existing combined cycle gas plants built since 2006 currently meet the new source standard. It is expected that new, more efficient combined cycle natural gas generators will have no trouble complying.

In contrast, new coal plants would be significantly impacted. Emissions rates associated with new coal-fired power plants will exceed the standard (set at 1,100 lbs CO2/MWh) by an estimated 40 percent. To comply with the standards, new coal plants will have to “capture” carbon dioxide and either sequester it in underground geologic formations or use it for industrial purposes.

The figure below helps to explain why these new source emissions standards for coal plants are expected to have no impact, their stringency notwithstanding. The National Energy Modeling System (NEMS) Annual Energy Outlook (AEO) 2011 has been used to examine the future competitiveness of new power generation capacity under different scenarios. In the “reference” – or most likely- scenario, it is forecast that no new coal-fired capacity (i.e. pulverized coal (PC) or integrated gasification combined cycle (IGCC)) will be built.

You might be wondering why, as sea levels rise and the climate warms, policy makers are working hard to implement a rule that is expected to have little if any impact on future emissions trajectories. There are at least two ways in which the proposed standards could exceed expectations:

(1) A backstop for future emissions increases

If economic conditions manifest differently than expected and there is renewed interest in building coal plants, this policy will require that any new coal capacity be equipped with at least partial carbon capture and storage (CCS) technology. For example, if natural gas prices are much higher than expected, the new source standard could reduce the carbon intensity of new power plants below what would otherwise prevail.

The figure below summarizes some of the numbers used in the regulatory impact assessment of the new source standard. The 20 year levelized cost of energy for new natural gas generation (blue bars) is estimated over a range of natural gas prices. The grey bars correspond to the levelized costs of new coal plants with no carbon capture.

Taking these levelized cost estimates as given, this figure shows that new supercritical pulverized coal (SCPC) plants without CCS are cost competitive with new combined cycle gas in the scenario in which natural gas prices are much higher than expected. In this case, the new emissions standards would increase industry costs and reduce industry emissions. The cost of building new capacity would increase by an estimated $5/MWh because natural gas generation would be deployed (LCOE $86/MWh) versus the more inexpensive pulverized coal (LCOE $81/MWh). The emissions intensity of new power plants would be reduced by an estimated 1000 lbs CO2/MWh. Assuming the reductions in domestic emissions are not offset by leakage in the form of coal exports (not necessarily a safe assumption), the benefits from this emissions standard would exceed the costs so long as the social cost of carbon exceeds $11 – $12 /ton.

(2) Incentivizing the development of carbon capture technologies

There is another way in which these standards could contribute to future emissions reductions. Many analysts see CCS is an essential part of the portfolio of technologies needed to achieve substantial global greenhouse gas (GHG) emissions reductions. But CCS technology is currently quite expensive. And these costs are unlikely to fall without significant investment in research and development. A firm regulatory commitment to lowering the emissions intensity of the power sector has the potential to incentivize increased investment in clean coal technologies (although the ways in which these standards create incentives to accelerate investment is quite nuanced).

An essential first step

Will these new source standards deliver the kinds of greenhouse gas emissions reductions that will be needed to address the global climate change problem? Absolutely not. That said, the proposed standards do represent an important first step that does not require additional action from Congress. Importantly, new source emissions standards serve as foundation for the next milestone: regulating greenhouse gas emissions from existing power plants. Standards for existing sources have the potential to have a much more significant impact because they affect the current fleet of sources. To learn more about proposals for existing standards, look for an EPA-sponsored listening session near you.

Meredith, until we make coal less economically viable globally it will continue to follow the path of least resistance and be burned somewhere.

If President Obama was serious about reducing atmospheric carbon he would levy a revenue-neutral carbon tax on coal coming from the mine – but his ties to the coal industry run deep, and any policy which adds an effective cost to carbon is probably off the table.

What we end up with, as you correctly point out, is little more than a talking point.

You wrote two conflicting statements: “you might think these new standards will deliver substantial emissions reductions at substantial economic cost to the coal industry. Think again” and “In contrast, new coal plants would be significantly impacted.” These are only true if no new coal plants are built, which is what will happen. CCS is not commercially demonstrated nor economically viable. The pre-requisite IGCC coal plants are not being built; there only one such US plant, outside Tampa.

Yes, natural gas combined cycle turbines (NGCC) do and will meet the CO2 emissions limitation, but your graph nicely illustrates the much larger build rate for natural gas combustion turbines (CT) (jet engines with no steam boiler). Such CTs today do not meet the new standard, but they are required to back up wind and solar sources — NGCC start times are too long to fill in for clouds or wind lulls.

Excess CO2 in the air can not be much worse than concentrated CO2 in the ground. Therefore, solutions to excess CO2 are in new (low carbon) capacity buildup and in whatever further efficiency and conservation possible.

As usual, politics interferes with the REAL solutions. If too much coal regulation becomes mandatory, perhaps there is a real chance at unlimited clean energy.

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